How is foreign income taxed?

Vijay Nayak (name changed) is your regular software geek, holding a plain vanilla day job like countless others. What makes him stand out is the extra income he makes from overseas sources. Nayak develops and sells gaming software applications online through an American software giant's Website. Every time his application is downloaded by users, he makes a neat sum.
In fact, his yearly foreign earnings occasionally exceed his regular salary. Chances are that you have met or heard of someone like Nayak, who is engaged in a skill-based profession and burns the midnight oil to tap overseas opportunities while going about his day job. There are enough and more such avenues available today, with newer ones opening up every year. "Typically, such opportunities are available in skilloriented professions. It could be software development, technical consultancy (architectural or engineering designs), gaming application designing, and so on," says Rajesh Srinivasan, leader, global employment services, Deloitte India.